CROSSING THE DIGITAL DIVIDE: THE URGENT AND IMMEDIATE IMPERATIVE
A decade into the conversation about “digital transformation,” CEOs and boards continue to struggle to convert their legacy businesses into tech- and data-enabled, customer-centric organizations. Many still fail to sufficiently evolve their organizations’ technology and data capabilities, and do not take a holistic approach to creating an integrated, connected-customer business strategy. As we tackle the ongoing global pandemic, the risks of being on the wrong side of the digital divide have become increasingly apparent. Based on thousands of client engagements, Russell Reynolds Associates has developed a framework to support CEOs and boards as they navigate this journey in an increasingly dynamic and volatile environment.
Technology Transformation Playbook for Boards and CEOs
- A 2019 MIT study shows that having multiple tech-savvy directors on the board contributes to above-market performance in both revenue and profitability.
- Address the CEO succession conundrum – Most companies have potential CEO successors who either have large scale P&L experience or innovation and disruption experience. Neither of these are ideal. Companies need to think about how they can create new roles that allow potential successors to work across this divide.
- Leveraging direct connectivity to the consumer with an integrated omni-channel approach will move customer experience to the next level.
- From Finance and HR to Supply Chain, digitizing core functions will increase efficiency and capabilities by capturing and assimilating data and drive toward an insight-driven organization.
- The most progressive organizations are behaving like technology companies, developing flexible, secure and scalable platforms, led by a single tech and data leader, reporting directly into the CEO.
- Successful organizations focus on a more agile culture as a critical element of a transformation strategy.
The following are examples of industry-leading organizations that have thought holistically about the leadership implications of tech-enabling their entire business and have achieved significant transformation as a result. While some of the examples below are of large global organizations, we’ve seen these strategies play out for companies of all sizes, including in the private equity sphere where investors are bringing technology operating partners onto their teams to drive transformation across their portfolio.
LEGACY MEDIA AND ENTERTAINMENT COMPANY RE-ORGANIZED TO CREATE NEW STREAMING BUSINESS
- Brought tech and digital talent to the board early including Facebook COO Sheryl Sandberg (on Disney board 2010 – 2018), Twitter CEO Jack Dorsey (2013 – 2018), Oracle CEO Safra Catz (2018 – present) and Illumina CEO Francis deSouza (2018 – present)
- Focused on the strategic acquisition of a tech company that allowed the company to pivot the business model and embrace streaming.
Attracted digital talent, integrating them into the organization, and investing in their long-term success.
MOVED FROM LEGACY TO DIGITALLY ENABLED WITH NEW FINTECH PLATFORM
- Recruited tech talent to the board including former Apple CFO Peter Oppenheimer (on Goldman Sach’s board 2014 – present) and former Goldman Sachs Divisional Head of Operations & Technology David Alan Viniar (2013 – present).
- Built a fintech platform called Marcus, which was originally built as an online lending platform and then scaled to hold $60 billion in consumer deposits. Marcus aims to contribute $1 billion in revenue by the end of 2020.
- Positioned organization to attract tech talent starting with the CEO declaring Goldman a “technology firm”’ and then hiring Charles Elkan (previously machine learning director for Amazon) and Marco Argenti (previously Amazon VP of IoT, Serverless, Mobile, AR/VR).
TRADITIONAL SHOE MANUFACTURER TO DIGITALLY CONNECTED, CUSTOMERCENTRIC BUSINESS
- Recruited tech talent to the board including Deloitte Managing Principal Cathy Benko (on Nike board 2018 – present), IBM CMO and Digital Sales SVP Michelle Peluso (2014 – present) and Apple CEO Tim Cook (2016 – present.
- Introduced a tech-savvy CEO, hiring John Donohoe (previously CEO of ServiceNow and former CEO of eBay) to prioritize digital experience and ecommerce for sustainable revenue growth.
- Increased D2C through digital platform and products by prioritizing digital customer experience and data analysis. This led to personalized digital products, with direct-toconsumer accounting for 1/3 Nike revenue.
STORE-BASED RETAILER DEVELOPED TRUE OMNICHANNEL APPROACH TO CUSTOMERS
- Created a new customer-centric digital role and mandate to develop digital offerings and omnichannel capability and hired former GrubHub CMO and Google Express marketing head Barbara Martin Coppola to fill it.
- Digitized core functions from customer fulfillment and engagement to warehouse inventory and supply chain to support new operating model.
- Built new highly credible technology function led by a new chief technology officer, Susan Standiford (previously Zeal Networks COO/CTO), who reports into the chief digital officer, Barbara Martin Coppola.
TRANSITIONED FROM HARDWARE TO SOFTWARE- AND IOT-CENTRIC
- Recruited tech talent to the board including former SAP CFO and interim CHRO Dr. Werner Brandt (on CONAME board 2018 – present) and former SAP Co-CEO Jim Hagemann Snabe (2013 – present).
- Focused on advanced technologies by divesting its oil and gas business and redeploying capital to the Digital Industries and Smart Infrastructure businesses focused on energy efficiency, renewable power storage, distributed power, and electric vehicle mobility.
- Drove firm-wide culture change which started in 2014 with a plan called “Vision 2020” that fostered more of an “ownership culture.”
BUILT CORE TECH AND DIGITAL CAPABILITIES TO ENABLE ALL ASPECTS OF THE BUSINESS
- Recruited tech talent to the board including Mary Ellen Coe, Google’s president of global customer solutions (on board 2019 – present) and former Accenture managing partner and CFO Pamela J Craig (2015 – present).
- Combined data into single analytics platform, allowing data from the laboratories and manufacturing to feed into a common, advanced analytics platform.
- Created a progressive digital and tech role by restructuring the organization to combine technology and digital functions under one leader who was elevated to the ExCo level.
DATA DRIVEN CUSTOMER-CENTRICITY
- Revamped CEO succession process to focus on progressive skill sets such as changing culture, improving customer experience, promoting customer- related innovation, and utilizing data effectively in the new CEO profile.
- Aligned go-to-market and digital functions under one leader, hiring Atif Rafiq (previously CDIO, Volvo Cars USA) as president of Commercial & Growth to own the customer lifecycle from digital product management to UX and driving transformation.
- Combined and utilized data pools, connecting the data from various business units and enhancing analytic capability to become a true data-driven organization.
DIGITIZING ACROSS FUNCTIONS TO BECOME THE WORLD’S MOST CONNECTED BREWER
- Recruited tech talent to the board including former SAP CIO Ingrid-Helen Arnold (on Heineken board 2019 – present) and Rosemary L Ripley, MD NGen Partners LLC (2019 – present).
- United core functions on a single platform using an integrated business planning approach. Now in its sixth year, Heineken’s partnership with JDA Software is focused on uniting supply chain, sales, marketing, finance and procurement on one cloudbased platform.
- Created a progressive digital and tech role, appointing former Heineken USA MD Ronald den Elzen as its first Chief Digital and Technology Officer, reporting directly into the CEO, and bolstering him with direct reports for both data and analytics.
Questions CEOs and Boards should be asking:
True transformation requires alignment between the organization’s strategic objectives and its leadership and cultural needs:
- Have you ensured that you have the right digital and technology skillsets in the board room to see future disruption and to challenge the organization on how well it is leveraging digital and technology?
- Do you have a leadership succession plan that supports and advances your technology-driven strategy, and develops a bench of capable leaders with both operating scale and technology acumen?
- How do you enable and empower your next-gen digital talent and tech ecosystems to support this new organization?
- Where do you require new talent and new roles to bolster digital and tech capabilities, and where should you invest in the reskilling and training of the existing workforce (mobilizing the “middle” of the organization around next-generation skill sets and decision-making)?
- What needs to change to align your front-end and back-end technology functions under a single leader and digitize the core business functions in between?
Is your culture a significant barrier to digital transformation, cross-functional agile collaboration and/or data-driven decision making?
WOLFGANG BAURIEDEL Wolfgang Bauriedel is a senior member of the firm’s Technology Sector, where he leads executivelevel digital and technology searches and advisory across industries. His mission is to elevate the role of technology in board and C-suite for competitive differentiation. He is based in Boston.
TRISTAN JERVIS Tristan Jervis co-leads the firm’s global Technology team. Based in London, he focuses on transformational leadership issues, ranging from assessment and hiring of key technology executives and board positions to individual and team development.
GEORGE HEAD George Head is a Knowledge Associate for the Technology Officers Practice, based in London. Working broadly across the technology sector, George is focused on identifying emerging trends and codifying the priorities outlined by our clients.
TUCK RICKARDS Tuck Rickards heads the firm’s San Francisco office and leads the Technology Officers Practice. He is also a core member of the Board & CEO Advisory Partners, where he focuses on transformational leadership issues ranging from CEO succession to board alignment.